We Have Officially Run Out Of Greater Fools

Tyler Durden's picture




 

"2015 was unsually poor."

That's how Citi's iconic credit strategist Matt King begins his latest report, starting with a chart we have shown previously, namely that total returns across most asset classes in 2015 were downright miserable - "near zero or worse" - and that as a result the active manager comunity was humiliated to a degree not seen since 2008, especially in the high yield space, where as we know, several liquidating mutual and hedge funds were forced to gate over the past month.

 

Which brings us to the question every hedge funder, and especially their investors, have been asking themselves: "why did active managers struggle so much."

King's answer is twofold: on one hand contrarian strategies did not work, while on the other momentum strategies were often stopped out.

 

King asks: were managers "just unlucky, or is this a sign of something bigger."

His answer is emphatically the latter, and when looking at market dynamics of both position and flow-driven markets he notes that while "greater fool" investing has dominated for a while...

 

... now that the series of bubbles blown by central banks one asset at a time, is popping and the result is a scramble for cash...

... the investing world finds itself in a dire predicament: we may have run out of "greater fools."

Which is terrible news for the greatest of fools: central banks themselves. King's summary? we are close to a paradigm shift because central banks couldn't even push up inflation breakevens, never mind markets.

The conclusion: "central banks grip seems to be fading."

Which means investors now find themsleves in a world without "greater fools", and in which the central planners' iron grip on markets, is fading.

Is there any wonder panic has returned to a "market" in which fundamental investing, long forgotten, suddenly matters once more and as we have been showing over the past 7 years - undeterred by the great Copperfieldian act put on by central banks since 2008 - the fundamentals of both the economy and the market have never been worse?

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Thu, 01/07/2016 - 14:03 | 7012452 1000yrdstare
1000yrdstare's picture

Simple Cramer!

Thu, 01/07/2016 - 14:06 | 7012474 khnum
khnum's picture

we need to bring in new punters perhaps if Cramer juggles,rides a unicycle and made those little balloon animals.....

Thu, 01/07/2016 - 14:14 | 7012534 EscapeKey
EscapeKey's picture

the "greater fool" strategy has worked for a while, because the federal reserve was it.

now that they're - allegedly - out of the game, corporates find that retail investors have fled the scene, and that their income will now come from other investment banks.

until the federal reserve re-emerges as the greatest (*) fool.

 

(*) except, of course, that it's the taxpayer who will ultimately foot the bill, and hence prove to be the greatest fool of them all.

Thu, 01/07/2016 - 14:25 | 7012601 nope-1004
nope-1004's picture

Greater Fool?  I resent that Tyler.  You know, they aren't making any more land in Japan.  Face it, house prices can only go up.

But in Kentucky, they have tons of land and can build to suit, so house prices can only go up there too.

Let's keep it real.

/s

Thu, 01/07/2016 - 14:40 | 7012725 Tall Tom
Tall Tom's picture

Tyler..YOU ARE WRONG...

 

I am the Greater Fool...

 

Look at me...Pick me, I tell you, pick me.

 

I am just another lowbrow in the Land of Confusion, I'll tell ya'.

Thu, 01/07/2016 - 15:58 | 7013200 Temporalist
Temporalist's picture

Money.

On.

The.

Sidelines.

 

Thu, 01/07/2016 - 14:55 | 7012834 Son of Captain Nemo
Son of Captain Nemo's picture

(*) except, of course, that it's the taxpayer who will ultimately foot the bill, and hence prove to be the greatest fool of them all.

Which taxpayers might those be?...

The ones that were paying for a $2.3 trillion dollar defense budget that went missing the day before 9/11/2001 that now included "illegal narcotics" and opium production nurtured by our men and women in uniform with a "stars and stripes" flag patch on there shoulder that guarantees the drug lords that it's supervised by the U.S. Army and that we sell only the best!

P.S.

I see a very lean coffee colored gentleman in the oval office sobbing uncontrollably over the gun related deaths in his own Country as he secures shipments of thousands of assault rifles and TOW missile components to destinations unknown in Libya, Syria and Iraq with his hands tightly clutching a briefcase he says is ALL HIS they call the "football"!!!!

Talk amongst yourselves!

Thu, 01/07/2016 - 15:34 | 7013092 Son of Captain Nemo
Son of Captain Nemo's picture

P.S. P.S.

Over 67,000 hits on the alleged rape story in Germany and the carnage on the S&P and DOW along with OPEC and Baltic Index crashing Saudi economy in the shitter and news of Aramco possibly going public is all but forgotten.

No wonder we're ALL  fucked!!!

Thu, 01/07/2016 - 14:04 | 7012457 NotApplicable
NotApplicable's picture

Anybody want to buy a $100 Beanie Baby?

Thu, 01/07/2016 - 14:15 | 7012475 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

I'd accept it if you send it to me along with a ten dollar bill.

Thu, 01/07/2016 - 14:25 | 7012612 e_goldstein
e_goldstein's picture

No, but I have some awesome Tulip bulbs I'd be willing to trade for it.

Thu, 01/07/2016 - 14:04 | 7012460 LawsofPhysics
LawsofPhysics's picture

No we have NOT.  The next batch of "greater fools" will be sent to die in WWIII.  Unless, for the first time in human history, there is a global rejection of fiat and government mandates/laws.

Yes, moral hazard is indeed a real motherfucker.

Thu, 01/07/2016 - 14:13 | 7012520 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

'global rejection'!  All I see everywhere is Political Correctness, which reflects fear and deep cowardice, rather than the courage that would be a prerequisite of any 'global rejection'

Thu, 01/07/2016 - 14:20 | 7012578 LawsofPhysics
LawsofPhysics's picture

unfortunately, yes, hence the cannon fodder.  Evolve or die, it has been that way forever.

Thu, 01/07/2016 - 14:20 | 7012582 stumbLebum
stumbLebum's picture

We need to overthrow the Putin administration. That's Job 1, costs be damned.

Thu, 01/07/2016 - 14:27 | 7012624 T.Gracchus
T.Gracchus's picture

You forgot the 'Sarc' tag- although, from your previous postings it is not entirely inconcievable that you are being serious- a 'greater moron' invading the greater fool thread.

Thu, 01/07/2016 - 16:33 | 7013445 doctor10
doctor10's picture

dayum!! somebody just found the next greater fool!

Thu, 01/07/2016 - 14:36 | 7012695 T.Gracchus
T.Gracchus's picture

LawsofPhysics:

It could just be that this time around the empire is just too weak to even be capable o properly implementing a call-up.

Hardly any millenials are going to want to die for a country that despises them- and the whole false-flag thing that might coerce them....well, that has been done to death, and I doubt crisis actors and fake blood will move many people to want to sacrifice themselves for Wall Street any more.

Could be more like the Ukraine war- military-age men melt away before conscription or simply refuse to fight properly once in the army.

I can't really see a repeat of the 'greatest generation' -can you?  

Thu, 01/07/2016 - 15:30 | 7013060 LawsofPhysics
LawsofPhysics's picture

Please, many had no choice in the 60's and 70's.

 

It's called conscription.  Educate yourself, if you are of age, prepare to leave the country.

Thu, 01/07/2016 - 14:46 | 7012771 css1971
css1971's picture

At time of war will the people wake up and realise that war is a racket?

 

Has it ever happened so far? N thousand year history.

Fri, 01/08/2016 - 07:08 | 7016014 August
August's picture

If the next Big One involves killing Muslims, you can bet there will be plenty of volunteers. They've been prepping the whole Clash of Civilizations thing for some time now. 

For those Amuricans who don't want an actual combat role, all that will be required is that they give their utmost at the workplace, whether this might be tending bar, producing inspiring TeeVee shows, or just giving blowjobs to visiting Asian businessmen.  Everyone's best effort will be needed!

Thu, 01/07/2016 - 14:05 | 7012472 KnuckleDragger-X
KnuckleDragger-X's picture

We're not running out of fools, merely fools with money.......

Thu, 01/07/2016 - 14:10 | 7012499 khnum
khnum's picture

Federal Reserve,IMF still plenty of fools with money

Thu, 01/07/2016 - 14:21 | 7012587 Hohum
Hohum's picture

Credit.

Thu, 01/07/2016 - 14:07 | 7012484 taketheredpill
taketheredpill's picture

Full retard

 

Thu, 01/07/2016 - 14:43 | 7012749 J Jason Djfmam
J Jason Djfmam's picture

Never go full retard!

Thu, 01/07/2016 - 14:08 | 7012493 VWAndy
VWAndy's picture

Next up bail ins.

Thu, 01/07/2016 - 14:16 | 7012494 BlueStreet
BlueStreet's picture

But Bob Doll says no bear market this year so there's nothing to worry about. Tired of so-called 'experts' who give their opinion in a way that sounds like fact. Just once it would be great to hear someone say they have no fucking idea what is going to happen.  

Thu, 01/07/2016 - 14:23 | 7012558 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

I am a talking head of sorts.

And I have absolutely no fucking idea what is going to happen.

Thu, 01/07/2016 - 14:12 | 7012517 silverer
silverer's picture

So what have I just learned?  If you want an ordinary person of average abilities and skill, you can include all experts in the group.

Thu, 01/07/2016 - 14:17 | 7012554 stumbLebum
stumbLebum's picture

Now's the time to snap up bargains and short precious metals.

Thu, 01/07/2016 - 14:17 | 7012556 Hohum
Hohum's picture

With a bang and a boom, F Troop!

https://www.youtube.com/watch?v=zVwFADi4Y38

Thu, 01/07/2016 - 14:42 | 7012742 J Jason Djfmam
J Jason Djfmam's picture

The Storch Market.

Thu, 01/07/2016 - 14:17 | 7012560 Yen Cross
Yen Cross's picture

 The Catcher In The Rye, was manditory reading when I was a young lad. [ back in the stone age]

Thu, 01/07/2016 - 16:15 | 7013319 mygameon
mygameon's picture

Extreme PC now require everything be re-written to be non-gender specific and a changing of the facts to fit the narrative.  Two moms or two dads, a dad and a goat, or 3 yeti centric families are the only required "reading" list today.

Good luck getting a HS student in the US to be able to diagram a sentence or understand that stories have protagonists and antagonists.

I do outreach into local HS in Iowa for STEM.  I can unequivocally tell you we are beyond fucked.

No ambition, no drive, no requirement for an understanding of the facts and dedication to become proficient in STEM.  No curiousity for understanding how the world works.

Isn't there an app for that??

It is ironic that nobody under 18 understands the definition of Dystopian or Apocolyptic.

They will very soon....

Thu, 01/07/2016 - 14:17 | 7012561 stumbLebum
stumbLebum's picture

Now's the time to snap up bargains and short precious metals.

Thu, 01/07/2016 - 14:20 | 7012581 insanelysane
insanelysane's picture

Says every MSM talking head any day the market closes down between 1 point and a 1,000 points.

Thu, 01/07/2016 - 14:21 | 7012586 Bastiat
Bastiat's picture

Just do it.

Thu, 01/07/2016 - 14:19 | 7012573 insanelysane
insanelysane's picture

But the few remaining workers are forced to put some money into 401k plans.  Even though these are long term strategies, the 401k management companies can trade all day long every day, to generate profits for themselves and for HFTers.

Thu, 01/07/2016 - 14:25 | 7012609 Witch-king of Angmar
Witch-king of Angmar's picture

The world has run out of greater fools? I think not. Perhaps the damage they can cause, for a while, will be reduced. We only hope. But it will only be lasting if the greater fools can look in the mirror and realize that they have been a fool. Do you really think Yellen can do that?

Thu, 01/07/2016 - 14:25 | 7012614 11b40
11b40's picture

Fundamentals? What are fundamentals? More importantly, what does this fundamentals stuff have to do with making money in the Stawk Market?

Thu, 01/07/2016 - 14:30 | 7012653 o r c k
o r c k's picture

Damn feathers, how do you----oh, I thought you said Stork Market....

Thu, 01/07/2016 - 14:47 | 7012775 Son of Captain Nemo
Son of Captain Nemo's picture

The fundamentals of both the economy and the market have never been worse?

The fundamentals of both the economy and the market have never been worse!

Fixed it!!!

Thu, 01/07/2016 - 14:58 | 7012851 TheRealDrBill
TheRealDrBill's picture

These graphs have titles, labelled axes, units, etc.  Is this Spock-with-a-beard ZH?

Thu, 01/07/2016 - 15:01 | 7012865 Kreditanstalt
Kreditanstalt's picture

"Investing" doesn't exist anymore.  Maybe they'll have to go to what is the only thing left in no-growth world: speculation.

Betting.  That's all we can do.

Thu, 01/07/2016 - 15:16 | 7012954 Kprime
Kprime's picture

fundamentals??  where we're going we don't need fundamentals,  back to the future.

Thu, 01/07/2016 - 15:19 | 7012976 sTls7
sTls7's picture

Today...  stock market...  casino...  perception..,  and total BS ... investment, what's that?

Thu, 01/07/2016 - 15:19 | 7012979 TheSkipper1967
TheSkipper1967's picture

No, I am SpartTHE GREATER FOOLacus

Thu, 01/07/2016 - 15:22 | 7013005 Grandad Grumps
Grandad Grumps's picture

When rich thieves are not punished because they are rich, then there is an incentive to be a rich thief.

Why don't sound fundamental strategies and stops work? Because those who are stealing your money are free to move the market in the opposite direction of your strategy and just steal it.

It is only greed that keeps people coming back to have more money stolen.

The important thing is that now that price can be absolutely controlled without market forces, there will never be a real and free market again.

Thu, 01/07/2016 - 15:32 | 7013077 OldPhart
OldPhart's picture

Carnage and chaos in central bank economics.  Who'da thunk?

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